Wednesday, November 5, 2008

Roundup: November 5


The DTCC has issued its long-awaited snapshot of the CDS market. There is $33.6tr notional of CDS outstanding (about 2mn individual contracts); about half of the CDS are written on individual names (sovereigns and corporates), and about half are tied to indices. In a test of the credit markets, Ireland had to offer 25bp over benchmarks to raise EUR4bn of 3-year bonds; Irish ten years are trading at a 106bp spread to Bunds.

ArcelorMittal will cut its Q4 steel output by over 30% in a bid to support steel prices. The ISM non-manufacturing index was down sharply for October.

Swedbank is seeking assistance from the Swedish bailout plan, and BMW is exploring whether it might have access to the German scheme. (Detroit is reportedly preparing to lobby the Obama administration for aid.) UBS warned on Q4 profits after saying it could take up to CHF6bn in charges and as wealthy clients continue to withdraw money from the private bank; Swiss Re posted a Q3 loss of CHF304mn and said it will suspend its share buyback program. BNP Paribas's Q3 profit was down 55.6%; Allied Irish Bank has scrapped its dividend. GMAC lost $2.52bn in Q3 and said it might have to close its ResCap mortgage finance unit; the company is reportedly considering becoming a bank holding company in order to take advantage of the TARP.

Carl Icahn has called for the restriction of bonus payouts at firms bailed out by taxpayer dollars. Andrew Cuomo, our New York State Attorney General, whose love for the camera is renowned but occasionally productive, has threatened to challenge any such payouts in court.


Barack Obama is the president-elect of the United States of America. President Bush called the Senator last night to congratulate him on his "awesome night." Rep. Rahm Emanuel (D-IL) has been offered the position of White House chief of staff; speculation on the rest of the cabinet is rife, with Larry Summers, Tim Geithner, and even Paul Volcker being punted as possible Treasury Secretaries. FP Passport has a nice roundup of some foreign press.

President Medvedev is the first to test the president-elect's mettle: he has threatened to place missiles on the Polish border in response to the missile-defense pact signed by the US and Poland in the immediate aftermath of the Georgian war. The presidents of Poland and Lithuania issued calls for the EU to suspend any partnership negotiations with Russia until it abides by the terms of the EU-ceasefire in the Georgian War. The two amigos, Gordon Brown and Nicolas Sarkozy, seem unlikely to play along with New Europe, as Brown faces Conservative challenges and Sarko attempts to cement his legacy around an illusionary ceasefire.

Racism may also play a role in Russian reactions to Mr. Obama. Medvedev's Kaliningrad speech erased many of the recent gains on the Russian stock exchanges, as political risk threatens investor confidence. Siberian Light picks up a theme from the speech overlooked in most Western press reactions; the length of the Presidential term will in all likelihood be extended from four to six years, enabling Russia's current leaders to remain in power that much longer, including a possible 12 more years for Putin.

Israel bombed Hamas tunnels yesterday as renewed violence threatens to break the June ceasefire. Ehud Barak warned of a complete breakdown in relations, and the attack may have been a signal by Israel that it expects strong support for its discretion to handle Palestinian affairs under an Obama administration.

Iraqi provincial and national elections will give us an important window onto the president-elect's Iraq policy, as the elections promise to change the lanscape of Iraqi politics. At the very least, the ineffective Maliki may lose office.

Newsweek reports that the FBI is investigating foreign hackers who hacked both presidential campaigns' computers for internal documents, perhaps looking for information on the actual policy perspectives of the two campaigns.

One important side effect of the Obama election may be the weakening of European political parties with anti-American stances. His wide popularity in Europe would seem to undercut these parties' raison d'etre.

The cholera outbreak in Zimbabwe has worsened so much that a national disaster may be declared, and various emergency agencies are acting to stop its further spread. IRIN reports on growing unrest among poor Zimbabweans who are relying on garbage dumps to feed themselves. It seems the Reserve Bank of Zimbabwe may have stolen as much as $7mn intended to help fight AIDS in the country.

Zimbabwe has called Botswana's anti-Mugabe interventions in the SADC negotiations to be "extreme provocation," violating Zimbabwe's sovereignty. Of course, all President Ian Khama has called for are fair, internationally supervised elections to be held to break the deadlock in the power-sharing agreement.

Even as Laurent Nkunda's rebels in eastern Congo have stopped short of Goma, the Lord's Resistance Army has intensified its attacks around Dungu, in the northeast. The UN World Food Program began dispensing food to refugees in Eastern Congo today.

Wen Jiabao warned that high growth in China must continue in order to assure social stability.

Ahmadinejad's interior minister has been impeached and removed from office after (ludicrously) forging an honorary degree from Oxford.

Two top Mexican officials involved in fighting the drug trade and gangs, including the Interior Minister, died in a plane crash yesterday.


Greenwire discusses the presidential transition and likely candidates for key positions at the DOE and EPA. The choice of John Podesta as transition manager points to a bright future for clean energy policy in the next administration. They also overview the fates of various renewables initiatives on state ballots yesterday.

It is likely that as many as three-fourths of solar firms will go out of business in the next few years, as consolidation, improving technology, and market maturity lead to increases in scale and consolidation of R&D. The difficulty of obtaining financing will not help, but the major trend is one of industry maturity, as many companies now planning utility-scale production plants will lose out to the competition.

SaudiAramco, the world's largest oil producer, is "reevaluating" $129bn of planned investment with oil prices falling. The consensus seems to be that all the talk of falling output and investment put on hold will lead to a recovery in oil prices in the next year or so, because of a supply crunch.

VeraSun may not be the only ethanol firm to face bankruptcy with credit availability and oil prices low. Their bad bets on the corn futures markets, which have been volatile of late, are not helping them recover.

The DOE and NREL have released a widely anticipated report on energy efficiency in moderately sized retail and grocery stores. According to the report, energy savings of 50% over ASHRAE standards (the standards most widely implemented in building codes across the nation) are achievable without the need for photovoltaic installation.

A paper in Nature looks at the energy balances for proposals to generate power from human feces, concluding that power densities are so low that feces should play its natural role in the ecosystem and be returned to the soil, not burnt wastefully.

The Antarctic ozone hole is the fifth-largest on record, but, in context, the NOAA says that it is only moderately large and not a source of concern.

Russia's crude oil export duty is "choking" investment in the oil sector and has led major producers to stockpile crude rather than export it at sub-par prices.

Lemming populations are sensitive to local effects of climate change, such as decreased snow depth, a new review of their population dynamics finds. This is one of the first studies of the quantitative dependence of a population on temperature dynamics.

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